Creditor Rights, Claims Enforcement, and Bond Performance in Merger and Aqcuisitions

CentER Discussion paper Series No. 2017-012

45 Pages Posted: 14 Mar 2017

See all articles by Luc Renneboog

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Peter G. Szilagyi

Central European University

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance

Date Written: March 9, 2017

Abstract

This paper shows that country-level differences in creditor protection affect bond performance around cross-border M&A announcements. Using Eurobonds and a global sample of 1,100 cross-border M&As, we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts. Positive creditor protection spillovers are enhanced by now-global jurisdictional cooperation in multinational insolvencies and creditors’ ability to do insolvency arbitrage. The spillover effects we observe are stronger for firms with higher asset risk, longer maturity bonds, and a higher likelihood of financial distress.

Keywords: Bondholder Value, Cross-Border Mergers and Acquisitions (M&As), Creditor Rights, Legal Enforcement, Event Study, Eurobonds

JEL Classification: G34, G32, G12, G14

Suggested Citation

Renneboog, Luc and Szilagyi, Peter G. and Vansteenkiste, Cara, Creditor Rights, Claims Enforcement, and Bond Performance in Merger and Aqcuisitions (March 9, 2017). CentER Discussion paper Series No. 2017-012, Available at SSRN: https://ssrn.com/abstract=2932060 or http://dx.doi.org/10.2139/ssrn.2932060

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Peter G. Szilagyi

Central European University ( email )

Nador utca 9.
Budapest, 1051
Hungary
+36-1-887-5092 (Phone)
+36-1-887-5005 (Fax)

HOME PAGE: http://people.ceu.edu/peter_szilagyi

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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